Richmac Interiors Ltd. (Bankrupt), Re, (1994) 147 A.R. 310 (QB)

• Judge: Virtue, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: January 05, 1994
• Citations: (1994), 147 A.R. 310 (QB)

Richmac Interiors Ltd. (Bankrupt), Re (1994), 147 A.R. 310 (QB)

MLB headnote and full text

In The Matter Of The Bankruptcy of Richmac Interiors Ltd.;

And In The Matter Of The Workers' Compensation Board of Alberta and The Royal Bank of Canada

(Action No. BK01-037297)

Indexed As: Richmac Interiors Ltd. (Bankrupt), Re

Alberta Court of Queen's Bench

In Bankruptcy

Judicial District of Calgary

Virtue, J.

January 5, 1994.

Summary:

A bankrupt company owed the Workers' Compensation Board for unpaid assessments. The Board appealed a decision of the trustee in bankruptcy denying its claim as a secured creditor under s. 136 of the Bankruptcy and Insolvency Act. The constitutionality of s. 126 of the Workers' Compensation Act was challenged as changing the scheme of dis­tribution under s. 136. If s. 126 was intra vires the province, an issue arose as to whether the Board was a Crown agent so as to be deprived of its security under s. 86 of the Bankruptcy and Insolvency Act.

The Alberta Court of Queen's Bench, in Bankruptcy, held that the Board was a secured creditor under s. 136; ss. 126(1) and 126(2) were intra vires, but s. 126(3) was ultra vires and to be severed from s. 126; and the Board was not a Crown agent. Pri­ority between the bank that petitioned the bankrupt into bankruptcy and the Board was left to be resolved.

Bankruptcy - Topic 3642

Creditors - Priorities - Precedence of Bankruptcy and Insolvency Act over prov­incial legislation - The Alberta Court of Queen's Bench, in Bankruptcy, stated that "it is not competent for the provinces to change the distributional rules in s. 136(1) of the Bankruptcy and Insolvency Act. ... Although the provincial legislature may act under the constitutional head of property and civil rights to pass legislation securing certain debts, as soon as such provincial legislation comes into conflict with federal bankruptcy legislation, the federal legisla­tion must prevail." - See paragraphs 14 to 15.

Bankruptcy - Topic 3642

Creditors - Priorities - Precedence of Bankruptcy and Insolvency Act over prov­incial legislation - Sections 126(1) and (2) of the Alberta Workers' Compensation Act gave the Board's charge for unpaid assess­ments priority over certain charges - Sec­tion 126(3) reserved special priority for wage claims - Section 136 of the Bank­ruptcy and Insolvency Act provided the distribution scheme for claims against a bankrupt - Worker's compensation claims ranked eighth, but the section applied only where bankruptcy occurred before Novem­ber 30, 1992 - A bankruptcy occurred after November 30 - The Alberta Court of Queen's Bench, in Bankruptcy, held that ss. 126(1) and (2) did not alter the dis­tribution scheme under s. 136 and were, accordingly, intra vires the province - However, s. 126(3) did conflict with s. 136 and was ultra vires and to be severed from the rest of s. 126 - See paragraphs 1 to 30.

Bankruptcy - Topic 3925

Secured creditors - What constitute - Workers' compensation boards - Section 126(1) of the Workers' Compensation Act gave the Board a "fixed, specific and continuing charge" on the property of an employer for unpaid assessments - The Alberta Court of Queen's Bench, in Bank­ruptcy, held that the Board was a secured creditor within the meaning of ss. 2 and 136 of the Bankruptcy and Insolvency Act - Secured creditor included, by definition, a person holding a charge against the property of the debtor as security for a debt due or accruing due to him from the debtor - See paragraphs 12 to 13.

Constitutional Law - Topic 6265

Federal jurisdiction (s. 91) - Bankruptcy and insolvency - Provincial legislation - Statutory liens - [See second Bankruptcy - Topic 3642 ].

Crown - Topic 26

Definitions - Agent or servant of Crown - What constitutes - Section 86 of the Bankruptcy and Insolvency Act relegated Crown claims to the status of unsecured claims - The Alberta Court of Queen's Bench, in Bankruptcy, held that the Alberta Workers' Compensation Board was not a Crown agent - The Crown did not exercise, over the Board, the nature and degree of control required to make it a Crown agent - See paragraphs 30 to 39.

Workers' Compensation - Topic 8647

Assessments upon employers - Statutory liens against employers - Charge on pro­ceeds of sale of employer's property - [See second Bankruptcy - Topic 3642 ].

Cases Noticed:

Alberta Treasury Branches v. Invictus Financial Corp. et al. (1986), 68 A.R. 207; 42 Alta. L.R.(2d) 181 (Q.B.), affd. 47 Alta. L.R.(2d) 94 (C.A.), refd to. [para. 13].

Ecarnot (Bankrupt), Re, [1990] 6 W.W.R. 550; 87 Sask.R. 9 (Q.B.), affd. [1991] 5 W.W.R. 268; 93 Sask.R. 179 (C.A.), refd to. [para. 13].

Deloitte and Touche Inc. (Ecarnot) v. Western Credit Union Ltd. - see Ecarnot (Bankrupt), Re.

Bourgault's Estate v. Deputy Minister of Revenue of Quebec, [1980] 1 S.C.R. 35; 30 N.R. 24; 105 D.L.R.(3d) 270, refd to. [para. 14].

Deputy Minister of Revenue v. Rainville - see Bourgault's Estate v. Deputy Minister of Revenue of Quebec.

Jacs Jackets and Crest Ltd., Re; Worker's Compensation Board (Alta.) v. Deloitte, Haskins and Sells Ltd., [1985] 1 S.C.R. 785; 60 N.R. 81; 63 A.R. 321; 19 D.L.R.(4th) 577; 38 Alta. L.R.(2d) 169, refd to. [para. 14].

Federal Business Development Bank v. Commission de la santé et de la sécurité du travail et al., [1988] 1 S.C.R. 1061; 84 N.R. 308; 14 Q.A.C. 140; 50 D.L.R.(4th) 577, refd to. [para. 14].

British Columbia v. Henfrey Samson Bel­air Ltd., [1989] 2 S.C.R. 24; 97 N.R. 61; 59 D.L.R.(4th) 726, refd to. [para. 14].

R. v. Workmen's Compensation Board (1963), 42 W.W.R.(N.S.) 226 (C.A.), refd to. [para. 32].

Fidelity Insurance Co. of Canada, Worker's Compensation Board and Imperial Con­struction (B.C.) Ltd. v. Cronkhite Supply Ltd. et al. (1979), 31 N.R. 230; 102 D.L.R.(3d) 255 (S.C.C.), refd to. [para. 34].

Westeel-Rosco Ltd. v. South Saskatchewan Hospital Centre Board of Governors, [1977] 2 S.C.R. 238; 11 N.R. 514; [1976] 5 W.W.R. 688; 69 D.L.R.(3d) 334, refd to. [para. 34].

Statutes Noticed:

Bankruptcy Act, R.S.C. 1970, c. B-3, sect. 107(1)(h) [para. 16].

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 2 [para. 12]; sect. 86(1), sect. 86(2)(a), sect. 86(2)(b), sect. 86(3) [para. 30]; sect. 136(1), sect. 136(3) [para. 9].

Workers' Compensation Act, R.S.A. 1980, c. W-15, sect. 78(4) [para. 17]; sect. 88 [para. 5]; sect. 126 [para. 1]; sect. 126(1)(d) [para. 6]; sect. 126(2) [para. 7]; sect. 126(3) [para. 8].

Counsel:

J.L. Ircandia (Howard Mackie), for the Royal Bank of Canada and the Trustee-in-Bankruptcy of Richmac Interiors Ltd.;

P.B. Michalyshyn, Alberta Attorney Gen­eral, for the intervenor, Attorney General of Alberta;

D.R. Mah and M. Gupta, for the applicant, the Workers' Compensation Board;

R.K. Moen, Federal Department of Justice, for the intervenor, Attorney General of Canada.

This case was heard before Virtue, J., of the Alberta Court of Queen's Bench, in Bankruptcy, Judicial District of Calgary, who delivered the following judgment on January 5, 1994.